Medicare pay cut may loom in wake of tax bill passage

The sweeping tax bill passed in the Senate could have a dramatic effect on Medicare physician pay, unless Congress waives its own pay-as-you-go rules requiring that any spending increases be offset by other spending cuts.

At issue is the Senate bill’s repeal of the Affordable Care Act requirement that every individual have health insurance – the individual mandate.

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During deliberations on the budget bill, physician organizations expressed their concerns that removing the individual mandate could dramatically increase the number of uninsured patients, and that the revenue lost from individual mandate penalties would cause a large cut to Medicare pay.

In a Nov. 14 letter to the majority and minority leaders of the both the House and Senate, the American Medical Association, the American Academy of Family Physicians, the American Hospital Association, and the Federation of American Hospitals called on Congress to maintain the individual mandate. The four health provider groups were joined in the letter by America’s Health Insurance Plans and the Blue Cross Blue Shield Association.

“Eliminating the individual mandate by itself likely will result in a significant increase in premiums, which would in turn substantially increase the number of uninsured Americans,” the organizations warned.

The American College of Physicians also urged the Senate to not end the individual mandate, after the bill was passed out of the Senate Finance Committee along party lines.

“We are concerned that the bill approved by the Senate Budget Committee on a party-line vote would repeal the Affordable Care Act’s requirement that persons purchase qualified health insurance coverage. ... which will destabilize the individual insurance market and lead to 13 million Americans losing coverage, double-digit premium increases, and insurers dropping out of the individual insurance market, according to the Congressional Budget Office and other independent analyses,” the American College of Physicians wrote in a Nov. 30 letter to Senate Majority Leader Mitch McConnell (R-Ky.) and Senate Minority Leader Charles Schumer (D-N.Y.).

ACP leaders also voiced concern about the looming cuts to Medicare that could result from the bill, noting that the Congressional Budget Office estimated that $25 billion will be cut from Medicare as part of a larger sequestration – a 4% pay cut to the fee schedule – that would result if offsets are not found to keep the deficit from increasing.

The ACP noted that, along with other pay cuts on the books from other legislative action, physicians would be losing nearly 7% of their pay from the fee schedule, beginning in 2018.

The next step in the process is for a House and Senate conference committee to resolve differences between the two versions of the tax reform bills. Both chambers would then vote on a compromise bill. At some point, there would to be a vote to waive the pay-as-you-go rules to prevent the Medicare cuts from going into effect. However, such a vote requires 60 votes in the Senate and a simple majority in the House, neither of which are guaranteed.

“It’s hard to say right now whether or not that can be worked out,” Julius Hobson, a Washington-based health care lobbyist, said in an interview. “There is desire on the part of the Republican leadership in the two chambers, and I suspect it might pass the Senate. The problem may well be in the House with the conservatives, particularly the House Freedom Caucus, and whether they will go along with that.”

Mr. Hobson noted that GOP leadership has said they plan to move on to entitlement reform after tax reform is finished. So, even if the cuts are spared by a pay-as-you-go rules waiver, they could still come into effect in some way when GOP tackles Medicare, Medicaid, and Social Security reform.

“It looks interesting to be saving cuts in Medicare on the one hand, but on the other hand, reform really means cuts,” he said.